PokerTek Reports Second Quarter 2011 Financial Results

PokerTek, Inc. (NASDAQ:PTEK) ( www.pokertek.com) is a licensed gaming company headquartered in Matthews, NC that develops and distributes electronic table games solutions for the gaming industry. The company’s products are installed worldwide and include PokerPro and Blackjack Pro. For more information, visit: www.pokertek.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are made in accordance with the Private Securities Litigation Reform Act of 1995. The forward-looking statements herein include, but are not limited to, the expected adoption of our gaming systems by casinos and other customers, and the expected acceptance of our gaming systems by players. Our actual results may differ materially from those implied in these forward-looking statements as a result of many factors, including, but not limited to, the impact of global macroeconomic and credit conditions on our business and the business of our suppliers and customers, overall industry environment, customer acceptance of our products, delay in the introduction of new products, further approvals of regulatory authorities, adverse court rulings, production and/or quality control problems, the denial, suspension or revocation of permits or licenses by regulatory or governmental authorities, termination or non-renewal of customer contracts, competitive pressures, and our financial condition, including our ability to maintain sufficient liquidity to operate our business. These and other risks and uncertainties are described in more detail in our most recent annual report on Form 10-K and other reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by applicable laws, and you are urged to review and consider disclosures that we make in the reports that we file with the Securities and Exchange Commission that discuss other factors germane to our business.

POKERTEK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Revenue

$

1,578,003

$

1,281,940

$

3,260,629

$

2,849,960

Cost of revenue

457,688

513,300

934,359

1,140,951

Gross profit

1,120,315

768,640

2,326,270

1,709,009

Operating expenses:

Selling, general and administrative

1,109,073

1,184,351

2,295,241

2,309,538

Research and development

241,056

247,256

505,816

532,436

Share-based compensation expense

108,687

148,464

266,638

370,043

Depreciation

20,478

34,373

40,759

73,705

Total operating expenses

1,479,294

1,614,444

3,108,454

3,285,722

Operating loss

(358,979

)

(845,804

)

(782,184

)

(1,576,713

)

Interest expense, net

26,727

37,018

53,009

69,573

Net loss from continuing operations before income taxes

(385,706

)

(882,822

)

(835,193

)

(1,646,286

)

Income tax provision

15,003

9,866

19,541

38,607

Net loss from continuing operations

(400,709

)

(892,688

)

(854,734

)

(1,684,893

)

Loss from discontinued operations

(429

)

(1,147,199

)

(10,403

)

(1,211,587

)

Net loss

$

(401,138

)

$

(2,039,887

)

$

(865,137

)

$

(2,896,480

)

Net loss from continuing operations per common share - basic and diluted

$

(0.06

)

$

(0.15

)

$

(0.13

)

$

(0.29

)

Net loss from discontinued operations per common share - basic and diluted

-

(0.20

)

-

(0.21

)

Net loss per common share - basic and diluted

$

(0.06

)

$

(0.35

)

$

(0.13

)

$

(0.50

)

Weighted average common shares outstanding - basic and diluted

6,609,726

5,851,058

6,411,406

5,740,174

POKERTEK, INC.

CONSOLIDATED BALANCE SHEETS

June 30, 2011(Unaudited)

December 31, 2010

Assets

Current assets:

Cash and cash equivalents

$

1,168,598

$

666,179

Accounts receivable, net

1,067,907

1,057,511

Inventory

977,548

997,064

Prepaid expenses and other assets

239,672

213,495

Net assets of discontinued operations

331,547

379,441

Total current assets

3,785,272

3,313,690

Long-term assets:

Gaming systems, net

2,028,692

2,255,030

Property and equipment, net

51,838

80,755

Other assets

275,770

402,498

Total long-term assets

2,356,300

2,738,283

Total assets

$

6,141,572

$

6,051,973

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

498,599

$

327,662

Accrued liabilities

468,207

648,604

Deferred revenue

929,531

817,789

Long-term liability - related party, current portion

40,163

21,402

Long-term debt, current portion

3,538

30,793

Current liabilities of discontinued operations

84,463

113,185

Total current liabilities

2,024,501

1,959,435

Long-term liabilities:

Deferred revenue

5,750

118,436

Long-term liability - related party

303,435

368,598

Long-term debt

700,000

800,000

Total long-term liabilities

1,009,185

1,287,034

Total liabilities

3,033,686

3,246,469

Commitments and contingencies

Shareholders' equity

Preferred stock, no par value per share;

-

-

authorized 5,000,000 none issued and outstanding

Common stock, no par value per share; authorized 40,000,000

-

-

shares, issued and outstanding 6,923,950 and 6,187,853 shares at

June 30, 2011 and December 31, 2010, respectively

Additional paid-in capital

47,995,141

46,827,622

Accumulated deficit

(44,887,255

)

(44,022,118

)

Total shareholders' equity

3,107,886

2,805,504

Total liabilities and shareholders' equity

$

6,141,572

$

6,051,973

POKERTEK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,

2011

2010

Cash flows from operating activities:

Net loss

$

(865,137

)

$

(2,896,480

)

Net loss from discontinued operations

10,403

1,211,587

Adjustments to reconcile net loss to net cash used in operating activities:

(1) EBITDAS is defined as net income (loss) from continuing operations before interest, taxes, depreciation, amortization, share-based compensation, and non-cash charges. EBITDAS does not purport to represent net earnings or net cash used in operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to such measurements or as indicators of the Company's performance. The Company's definition of EBITDAS may not be comparable with similarly titled measures used by other companies.